Business, Insurance and Adaptation C40 Tokyo Conference on Climate Change Sharlene Leurig Manager, Insurance Program Ceres
Bringing together investors, companies and environmental organizations to integrate sustainability into the market Ceres is the world s leading network of investors and environmental groups working to address environmental challenges such as global climate change CalPERS and CalSTRS Conservation International Natural Resources Defense Council BP Coca-Cola Citi Dell Inc. Ceres Coalition members include: NYC Comptroller s Office F&C Asset Management World Wildlife Fund Ceres Company Network members include: Ford Motor Company General Mills Nike State Street Corp. 2
Outline Growing Attention on Climate Risk in Capital Markets Role of Business and Insurance in Climate Adaptation Key Areas for Action by Cities
Attention from Banks & Investors Banks just beginning to understand exposure to climate risks in their lending and investment portfolios Growing investor demand for companies to report their financial exposure to climate change 4
Investor Network on Climate Risk a project of Ceres Investor Network on Climate Risk (INCR) now has 70 investors with over $7 trillion in assets Acting on their fiduciary duty to manage risks and capture the opportunities (e.g. clean energy) The way a company manages its carbon exposure could create or destroy shareholder value (McKinsey Quarterly) Climate change is a topic that should be on the agenda of every Board of Directors (Goldman Sachs) Select members: AIG Investments BlackRock BC Investment Management Corp. CalPERS Deutsche Asset Management Florida State Treasury New York State Comptroller State Street Global Advisors
Transparency and Disclosure Disclosure of sustainability issues is becoming a prerequisite for demonstrating risk management and transparency. Global Reporting Initiative (GRI) developed by Ceres: over 1300 companies now report using the GRI Carbon Disclosure Project (CDP) Global Framework on Climate Risk Disclosure 6
Private Sector Businesses are a primary source of innovation for climate solutions, but stakeholders and shareholders are often the drivers of action. Every sector is exposed to some type of climate risk, whether it is water shortage, energy disruption or catastrophic loss Large variation in risk management within sectors and between the same company s facilities Private sector exposures can have larger impacts than company performance, affecting regional economy and even global markets If businesses and cities invest in resiliency to manage their own risks, they will experience mutual gains--the converse is also true 7
At-Risk Sectors All sectors face some type of risk. Firms with long-lived, fixed assets of particular concern. Banks and others within the financial markets are also exposed, but quantifying their exposure will be difficult. 8
A Critical Issue for Insurers The insurance industry must start actively adapting in response to greenhouse gas trends if it is to survive There could hardly be a debate of greater importance to the insurance industry. Lloyd s, Climate Change: Adapt or Bust
Insurance Insurance is essential to the health of global markets and local communities. All lines affected: Property, life, health, bond insurance, etc. Traditional insurance and emerging microinsurance markets must be maintained and cultivated Securitization & risk transfer to capital markets alone is insufficient-- global risks can only be managed by reducing our exposure and vulnerability Need to identify emerging risks and take preventive action--must be cooperative effort between insurers and governments 10
Insurer Action Insurers have been a leading voice for climate action, but not all insurers recognize the risks posed by climate change. Property and casualty insurers ahead of the pack Risk models beginning to test scenarios for adapting individual properties Insurers only undertake a single year s worth of risk, so they are still underwriting new development in the riskiest places Current trajectory, governments may be left holding the risk Life, health and bond insurers have a long way to go many do not perceive climate change as a serious risk Microinsurance faces unique challenges 11
Promoting Loss Prevention Land Use Planning UK Urban Flood Losses under Climate Change Source: Association of British Insurers
Key Areas for Action by Cities Looking Outward Investing to Drive Change and Secure Value Proxy voting Requiring asset managers to consider climate risk Setting investment goals to further mitigation & adaptation Collaborating with other Cities to Engage At-Risk Sectors Driving best practices & innovation globally 13
Key Areas for Action by Cities Looking Inward Planning for Climate Change with Private Risk Managers Land use planning is fundamental to maintaining insurability Infrastructure investments should be made in consultation with insurers Reporting Your Progress Insurers and pension funds are major investors in municipal bonds Bond ratings eventually will reflect a city s climate risk Less risky cities will be better positioned to attract capital for major infrastructure investments 14
Thank you Sharlene Leurig Manager, Insurance Program 617-247-0700 x127 leurig@ceres.org www.ceres.org www.incr.com 15